Surge In Suburban Housing Interest Hasn't Impacted Multifamily Rental Market
Apartments in the suburbs may not be feeling the heat of a suddenly on-fire housing market as city-dwellers flee to more space.
While thousands have left New York City and vacancies in the multifamily market increased, many New Yorkers flocked to the suburbs, flooding suburban real estate brokers with interest in renting and buying. But major apartment developers in the city’s suburbs told Bisnow this week that the multifamily market has not seen the same surge in demand.
“Overall, the market has been stable,” said Ginsburg Development Cos. founder and principal Martin Ginsburg, who develops and manages multifamily properties in Westchester and the Hudson Valley. “We haven’t seen any great changes.”
Suburban multifamily property owners say they have gotten inquiries about renting from New Yorkers looking to escape the city, but even with this interest, they said any surge they are currently seeing will soon even out to the slow influx that has been coming into the suburbs over the past five years.
It is still too early to fully understand how the Tri-State housing market has been impacted by the coronavirus pandemic, but indicators such as consumer interest and listing page views on online real estate sites show that apartments have not seen the same astronomical demand as single-family houses.
Multifamily developers are not necessarily looking to plot their next suburban location any more than they were before the pandemic. Property owners are noting consumer trends prompted by the pandemic but aren't necessarily acting on the situation where there are still so many unknowns, National Multifamily Housing Council Vice President of Construction, Development and Land Use Policy Paula Cino said.
“They are not so sure how sustainable what they’re seeing in the past two months will be in the future,” she said.
The trend of migration from New York City into the suburbs began years before the city became the epicenter of the coronavirus in the U.S. In 2018, New York City lost 40,000 people, according to the U.S. Census Bureau. Meanwhile, developers in suburban areas have prepared for many of these New Yorkers to move to the suburbs. In 2017, New Rochelle alone planned $4B in new development.
Nationally, suburban multifamily development was expected to be a safe bet going into 2020, according to CBRE's November market report, which showed investment returns generally higher in the suburbs than in cities.
Research and data available now don't seem to indicate a major change in development or interest, NMHC Vice President for Research Caitlin Walter said.
“While there could be an increase in interest, I haven’t seen any data supporting this,” she said. “Developers are working on projects that they were working on before the pandemic.”
A Zillow research report released in May showed that nationwide suburban rental home listing viewings on the online real estate database are on par with numbers from last year nationally. Suburban listing page views accounted for 64.2% of all listing page views in April 2020 compared to 65.7% in April 2019. Rural listing page views are up from 23.4% to 24.3% year-over-year, and urban views are up from 10.8% to 11.6% year-over year, Zillow’s report shows.
The number of people moving out of the city, however, has increased. Moving company Flatrate.com said that year-over-year, the number of people moving out of the city has gone up by 80% for those moving to Conneticut, 60% for those moving to Long Island, 43% for those moving to New Jersey and 33% for those moving to Westchester, CBS News reported. Those moving into the city dropped 30% year-over-year.
The increase in demand has largely been for single-family homes. Brokers in multiple suburbs told Bisnow that single-family homes that had been on the market for years before this had multiple bids since the pandemic. Demand for homes in Westchester, Greenwich, Bergen and Monmouth counties are all up 20% since March, according to a report from Manhattan research firm UrbanDigs.
But several developers that have built multifamily properties in the suburbs over the last five years told Bisnow they are not seeing an abnormal amount of interest and they are not scoping out any new projects that they weren’t already before.
“I think this notion that there is a tremendous amount of demand, I haven’t seen a tremendous demand on the rental side of it,” Cappelli Organization Executive Vice President Bruce Berg said.
Berg is currently overseeing the development of three multifamily projects that were planned before the pandemic, one in the construction stage and two in the design stage. Westchester-based Cappelli has developed properties in Westchester County, Fairfield County and on Long Island.
With the future of the consumer housing market so uncertain, suburban multifamily housing developers are not making any quick moves to build more as a result of any interest the area is seeing, Walter said. They also are not able to secure the capital to do so with the state shut down.
“It’s hard to get money right now for a construction loan,” Walter said. “If we have six months of this and patterns start to emerge, then we’ll begin to see some comfort amongst the uncertainty that these are actual patterns and not a one-off situation as a result of a global health crisis.”
Instead, Cino said, multifamily property owners in the suburbs are looking to the future at how to incorporate a changing demand for design, particularly in a post-pandemic world that values space and the ability to work from home. Many are looking to possibly include apartments with more open concepts and dens.
"A suburban location may be more attractive just because of the cost of those projects," she said.
RPW Group President and CEO Robert Weisz, who has office properties in Westchester and is currently developing two apartment buildings, said developers are waiting the pandemic out to see what demand will look like before determining what their next move is.
“The only constant is change, and we have seen that in every aspect of the industry,” he said. “Ten years ago, the hottest sector of the market was retail. Now, it is not so hot.”
Weisz didn't rule out that, in a year's time, the suburban real estate market may look a lot like it did before the pandemic.
“The pandemic showed that three to four months can be an eternity,” he said. “A year can be a very long time. It can be very different, and very different can be very similar to what life was before the pandemic.”
That being said, RPW has been looking to develop more since before the pandemic, based on the progressive migration out of the city that was already happening.
“When you make plans, you look at the trend for the next 10 to 15 years,” Weisz said. “I don’t think the world is going to be much different than it was before this.”